Groups debate cost of TVA's power shift from coal to gas

Groups debate cost of TVA's power shift from coal to gas

This undated photo provided by the Tennessee Valley Authority shows TVA's Widows Creek coal-fired power plant on Guntersville Reservoir at Stevenson, Ala. In 2006, scientists will begin testing underwater strobe lights at Widows Creek to scare off fish that can clog water intakes for the plant. The technology could help hundreds of coal plants facing tougher Clean Water Act requirements. (AP Photo/TVA)

Coal closings

› Allen in Memphis — Retire after completion of the gas-fired plant before Dec. 31, 2018

› Paradise in Kentucky — Retire Units 1 and 2 after completion of the gas-fired plant by end of 2017 (Unit 3 will remain operating)

Source: Tennessee Valley Authority

Closing TVA coal plants could push up electric rates in Tennessee by more than 20 percent over the next decade and leave power rates in the Tennessee Valley above the national average, according to a study released Thursday by backers of the coal industry in the region.

The Partnership for Affordable Clean Energy, a nonprofit group that works on energy policy across the South, said TVA's plan to shutter 7,000 megawatts of coal-fired electricity generation could prove costly if natural gas prices rise, power demand increases and TVA has to turn to more expensive alternative sources of generation.

In an 83-page study conducted by the Washington, D.C.-based economic research firm of Management Information Services Inc., PACE predicts closing more coal power plants such as Colbert, Johnsonville and Allen will push up TVA rates and cut 65,000 jobs and $900 million of manufacturing output in Tennessee.

"We've seen coal go from 60 percent (of TVA's generation) to 40 percent in recent years," said Lance Brown, the Montgomery, Ala.-based director of PACE. "This is a drastic shift that has real consequences for consumers."

But top TVA officials dismissed claims that rates will soar and jobs decline if aging coal plants are shut down and replaced with generation from more gas, nuclear and renewable fuels. The PACE study used outdated and inaccurate data, according to TVA Stakeholders Vice President Joe Hoagland, who led TVA's long-range power plan development over the past three years.

Hoagland said newer data shows that natural gas is cheaper and likely to remain less expensive, while the reliability of aging coal plants no longer makes sense. Over the past five years, TVA has shut down its John Sevier and Widows Creek fossil plants and plans to shutter some or all of the units at the Colbert, Allen, Paradise and Johnsonville coal plants across Alabama, Tennessee and Kentucky.

"There has been a fundamental shift in the price and availability of gas with fracking and shale production so that the long-term price and reliability of gas is far better than it was when the data this report uses was collected," TVA Chief Financial Officer John Thomas said.

TVA's latest integrated resource plan picked the lowest-cost option for TVA's energy future and that proved to be replacing coal plants that are more than a half century old with new and more efficient gas-powered generation that is more flexible and reliable, Hoagland said.

Even though the move away from fossil fuels by TVA is cutting emissions and helping TVA comply with new Clean Power Plan rules for carbon emissions, Hoagland said TVA decided to switch to gas and other sources rather than coal strictly based upon the cheaper cost of new generation compared with having to clean up and maintain or replace costly coal plants.

"We chose the best low-cost option," Hoagland said.

Brown, who helped direct the study released Thursday, voted while he was on the working group that reviewed TVA's long-range power plan to support the power changes, including the move away from so much coal generation. But Brown said Thursday he still remains wary about closing so many coal plants.

TVA has been raising electric rates each year, but at a rate in recent years below inflation. TVA expects that trend to continue, Thomas said.

But during a news conference in Nashville, state Sen. Ken Yager, R-Harriman, a strong supporter of coal, said coal generation should be maintained or expanded at TVA.

"Modern coal technology offers tremendous benefits to Tennessee power customers," he said. "It's important to both our local economy and affordable energy prices that coal continue to have a significant presence in a diversified TVA energy mix."

The National Black Chamber of Commerce also urged TVA and state regulators to promote "a well-rounded and versatile energy mix."

TVA and environmental groups insist that is exactly what it is doing by building more natural gas and nuclear power plants and contracting for more solar and wind generation to balance the utility's previous reliance primarily upon coal.

"These outside groups (like PACE) continue to push 1990s economic messages in the 21st century." said Dr. Stephen Smith, executive director of the Southern Alliance for Clean Energy. "Today's energy market clearly demonstrates that coal is no longer a least-cost option. These groups are simply mouthpieces for a coal industry that is desperately trying to stay relevant in the current market."